Government Urges Reform of Pakistan Ordnance Factories

Jul. 11, 2014 - 06:52PM
|

Visitors observe an assortment of assault rifles made by Pakistan Ordnance Factories (POF) during the first day of the LADD defense and security fair in Latin Americain 2013. POF is being urged to become more commercial. (VANDERLEI ALMEIDA/ / AFP)

ISLAMABAD — Pakistan’s state-owned ordnance producer, Pakistan Ordnance Factories (POF), is being encouraged to become more commercially oriented by the government with the aim of transforming it into a more self-sustainable enterprise.

Federal Finance Minister Ishaq Dar gave this direction to a visiting delegation of POF, headed by its chairman, Lt. Gen. Mohammad Ahsan Mahmood. Dar encouraged the POF delegation to change its business model to a more commercially oriented outlook and consider involving private industry in this endeavor.

Dar stressed his ministry’s support for these efforts, but emphasized POF needed to be turned around to ensure its goals are achievable.

Earlier, the POF delegation had presented Dar with its own proposed three-phased reform and restructuring plan, which Dar asked be made available to the Cabinet Committee on Restructuring along with a complete financial model.

The POF plan aims to make the company self sustainable within the next 10 years.

POF officials declined to provide details.

However, as part of its modernization plans, Mahmood said POF hoped to replace its legacy plant and machinery through profits from commercial sales and export earnings rather than government grants.

Analysts have long believed POF needed to reform its business practices.

Analysts Haris Khan of the Pakistan Military Consortium, says, “At present, POF doesn’t have a business plan that would support its conglomerate of factories geared toward designing and producing products of modern technology.

“Rather, the factory has become a support apparatus for Pakistan’s armed forces, notably the Pakistan Army.”

In this regard it makes a range of firearms (mainly the G3, MP5, and MG3 under license from German firm Heckler & Koch, and also some Chinese-designed weaponry like heavy machine guns and the Type-69 RPG), munitions of various types, and ammunition all the way up to heavy caliber artillery.

However, POF “has not produced any kind of modern weaponry,” as there is “almost negligible [research and development] and they are lacking in marketing skills.”

Though he highlights that POF started life as a consortium of private industrial units, it was later taken over by the Army, which he blames for the present state of affairs.

Former Australian defense attache to Islamabad, Brian Cloughley, says, “POF is a very good organization and produces some excellent equipment, but there is no doubt it is not modern in the purely business sense. Its business practices belong to a bygone age and it seems that the chairman, Lt. Gen. Mohammad Ahsan, is aware of this and is trying to bring it up to date.”

He believes the government’s efforts to support reform are “absolutely serious.” This is fortuitous because the required reform cannot be achieved without government support.

“The ‘three phase plan’ should be interesting but if there is no input from Dar and his department, it will not cover everything that the government wants,” he said.

“[POF] seem to be trying to head in the right direction, but they need economic experts to assist in construction of a workable business model. If the plan is good, there will be no problem about investment. The private sector will seize the opportunity for involvement. It’s all up to POF, now — but they have got to seek outside input from economic and business experts,” he said.

Khan said the required manpower and skills already exist in Pakistan.

“It is not that Pakistan is lacking the manpower and technical know-how to establish internationally benchmarked industrial complexes,” he said. “[Pakistan Atomic Energy Commission] and NESCOM [the National Engineering and Scientific Commission] have demonstrated that they are par with any known military industrial complex around the world.”

However, Khan said finances could possibly put the brakes on current reform efforts, as it has done in the past.

“The last government earmarked US$250 million for POF to computerize and upgrade machinery, but since the funds were not released nothing fruitful happened,” he said. ■